Barclays urges homeowners to make overpayments on their mortgage as its new study reveals only 10 percent are taking full advantage of the record low base interest rates.
The Barclays study, which surveyed 1000 borrowers, shows that approximately 85 percent of borrowers could shorten the length of their mortgage term if they paid just a little more than the minimum required of them.
A high number of borrowers currently on a tracker mortgage deal are enjoying lower mortgage repayments as the Bank of England’s Monetary Policy Committee continue to hold the interest base rate at its historic low of 0.5 percent.
The research showed that by making an overpayment of an additional £50 per month, over a 25 year average mortgage value of £150k would decrease the mortgage term by 28 months – more than two years.
Stretching this overpayment to £300 per month would save 9 years 7 months on a mortgage term (based on the same average £150k mortgage with a base rate + 2.49% interest rate).
Six percent of the survey respondents claimed they expected to begin overpaying later this year. 24 percent said they aimed to repay their mortgage earlier than the planned term and 56 percent expected to reduce their mortgage term to 15 years or even less.
Andy Gray is the Head of Mortgages at Barclays. He commented:
“Even with the reality that interest rates will start to rise at some point, many borrowers are likely to be able to afford a little more than they think.
“I’d urge all homeowners to review their current mortgage arrangements.”